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Flashcards in Ch. 1 Section Reviews Deck (13):

What is economics?

The common sense science on how and why people, businesses, and governments make the choices they do.


What two contradictory ideas result in the necessity of choice?
Explain and define each.

Insatiability - everyone has unlimited wants
Scarcity - everything is finite or limited


What character quality is essential for the Christian to have victory over insatiability? Explain.

Contentment. Which means that you're satisfied with what God has provided, and being satisfied frees you from the struggle of insatiability vs. scarcity.


What is the difference between an economic cost and opportunity cost?

Economic cost is the value people place on a good or service and is reflected by its price.
Opportunity cost is the satisfaction a person gives up or the regret he/she experiences by not choosing differently.


What is the difference between intrinsic value and subjective value?

Intrinsic value is the value a person believes a product to have because of its nature, it's scarcity, and the amount of labor to produce it.
Subjective value is the value of a product based solely on the opinion of the buyer.


Explain and give an example of any three of the following: good, service, free good, nuisance good, economic good, economic service, free service.

Good - any tangible thing that has a measurable life span (Textbook)
Service - intangible item (work of a teacher)
Free service - services provided freely by God in nature
(wind on a windmill)


You must choose between going to bed at your regular time or staying up late to study. What would be the opportunity costs and benefits of this decision?

I'd rather stay up late to study. The cost is losing time to sleep and the benefit will be that I've studied and will be prepared.


What is the difference between microeconomics and macroeconomics? Give an example of each

Microeconomics deals with the choices made by individual units while macroeconomics deals with large-scale economic choices.
(Microeconomics ex: what causes a person to save money?)
(Macroeconomics ex: what causes bank interest to rise and fall?)


What is the difference between positive and normative economics?

Positive economic entails observing economic choices and predicting economic events.
Normative economics entails making value judgements about existing economic policies.


What idea did Menger propose that radically changed the way economics should determine an object's value?

Menger proposed that an individual's decisions are based on personal utility.


List three reasons that economics is considered a science.

1. Economists based their decisions on observations.
2. Economists use these observations to predict future choices.
3. Economists attempt to control economic events by manipulating economic variables.


Why do insatiability and scarcity necessitate choice?

Choices are necessary because insatiability and scarcity pulls a person in opposite directions. You cannot satisfy both.


From which language did the word economics originate, and
what was its original meaning?

It comes from the Greek words "oikos" and "nomos". It meant: Administration of the household.